NEW YORK ( TheStreet) --What an impressive company and what a lucrative business model comes with shares of Chevron (CVX - Get Report).
When you see it has increased the quantity of cash being held by nearly 60% over last year, you have to not only offer kudos but you have to wonder why.
Having checked the balance sheet of its bigger competitor
I could plainly see that Chevron has more cash on hand. This could be seen by the end of 2011 when CVX had increased the cash carried on the balance sheet by nearly 13% over the previous year.
As of June 30, CVX was sitting on a $21.46 billion war chest in total cash and had a staggering $10.65 billion in levered free cash flow (trailing 12 months). In comparison, XOM had $17.8 billion in total cash and $15.58 billion in levered free cash flow (trailing 12 months).
As recently as August 28,
The Wall Street Journal
, in a story titled "Chevron Cash Fuels Deal Talk," reported the investment community has been buzzing about what Chevron is planning to do with all that cash. "Even if Chevron used the money to retire its debt," the
mused, "it would still have about $11 billion left over."
That should make shareholders of CVX feel secure with their $3.60-per-year current dividend payout, which equals a payout ratio of only 25%. Shareholders would dance a jig and see the shares they hold rise in price if the board of CVX is planning on using some of the company's cash for a special, one-time bonus dividend. Yet, so far this is only a wish, a dream and not yet a rumor.
The company has some big expenses, including two projects in Australia to build plants that will convert natural gas into liquid and compressed forms. This project will cost billions of dollars, but even if there are some price overruns Chevron will have plenty of cash left over to make an acquisition or two.
The list of
products and services
CVX offers is a veritable treasure trove and places it towards the top of the list of innovative, environmentally-reasonable energy companies on the planet.